Regular readers of this blog will know that solar-friendly policies are under constant attach by the utilities, especially the three Investor-owned utilities (or IOUs as they are known), PG&E, SDG&E and our own SCE. Well they are at it again, with rate proposals before the California Public Utilities Commission (CPUC) that could harm both solar and energy efficiency measures alike. Fortunately, we have an opportunity to have our say - here’s our take. (H/t our friends at CalSEIA.)
Current policies in California, most notably net metering, along with a tiered rate structure (whereby you pay more for electricity as you use more) have provided powerful incentives not only for consumers to install solar, but to also take proactive measures to reduce their energy consumption. As a result, energy use in California over the past twenty years has grown slower than the growth in population despite the explosion of new electronic devices in homes and businesses during that time. Indeed, California has lead the way for the rest of the Nation, proving that you can have a twenty-first century lifestyle and still reduce your energy demand.
In other words, these policies have been a success.
The proposals being floated at the CPUC would change rates throughout the three IOU service areas (i.e., much of California) and threaten that success. In particular, they are seeking to add a flat, monthly fee to everyone of $10 to all bills, regardless of use and to reduce the number of tiers from four to two. In addition, the rate for the lowest tier would increase, making this a double-whammy not just to solar owners, but to the poorest electric customers who will see a rise in their rates. (So much for the utilities’ concern over hurting the poor!)
Fortunately these changes are not yet cast in stone and the public, particularly advocates for solar and energy efficiency, have a chance to have their voices heard. The CPUC is holding a series of public hearings, some in the Run on Sun service area, as well as others around the state. Here are the upcoming hearings:
September 29, 2014
2:00 pm & 6:30 pmFontana City Council Chambers 8353 Sierra Avenue Fontana, CA 92335
September 30, 2014
2:00 pm & 6:30 pm?Temple City Council Chambers 5938 Kauffman Avenue Temple City, CA 91780
October 2, 2014
2:00 pm & 6:30 pmPalmdale City Council Chambers38300 Sierra Hwy, Suite APalmdale, CA 93550
October 9, 2014
2:00 pm & 6:30 pmHoliday Inn Chico – Conference Center685 Manzanita Ct.Chico, CA 95926
October 14, 2014
2:00 pm & 6:30 pmFresno City Council Chambers2600 Fresno StreetFresno, CA 93721
We are planning on attending the hearing in Temple City. If you attend one of these important hearings, please let us know about your experience in the comments.
Yesterday we wrote about how SCE’s residential customers who take service under the Domestic rate structure could see their bills rise by 12% or more starting with their June bills, and we warned commercial customers not to get complacent about their own bills. Today we drop the other shoe: GS-1 and GS-2 customers, the bad news starts now.
SCE’s commercial customers (what it refers to as general service, hence the “GS") are largely divided into two groups: those that pay only for monthly energy usage (GS-1) and those that pay for both usage and peak power demand charges (GS-2). You can use all the energy you want in a month, but as long as your peak power demand never exceeds 20 kW you will stay in GS-1. Once your demand sneaks past 20 kW however, you will be assigned to paying higher bills under GS-2.
Solar for GS-1 users is a no brainer, just as it now is for SCE’s residential customers. For GS-2 customers, however, the question is a tougher call since it can be very hard to know how well solar will coincide with a potential client’s peak power demands, and it is those demand charges that so drive the pain of GS-2 bills. Neither GS-1 nor GS-2 are tiered, meaning that every kWh of energy is charged the same. Under GS-2, however, demand charges are significantly higher during the summer than they are the rest of the year.
We said that you could use all of the energy you like and remain in GS-1 but that’s not strictly true—if your peak power demand stays below 20 kW you can only pull so much energy into your site. Let’s imagine a commercial entity that is right under that limit: say 19 kW peak demand and they sustain that demand for 10 hours a day, every day. The remaining 14 hours their demand drops to just 5 kW. Their daily usage averages:
Usage = 10*19 + 14*5 = 190 + 70 = 260 kWh/day.
Under the old rate, this maxed-out GS-1 customer would have seen a bill of $15,355 or roughly 16.2¢/kWh. (A bargain, by the way, compared to what a residential customer using that much energy would have paid.)
Under the new rate, their bill jumps to $16,777 an increase of 9.26%, and now they are paying 17.7¢/kWh.
We recently provided a proposal to a potential GS-2 client, so we will model their usage to demonstrate what the new rates will do to a GS-2 customer’s bill. Their usage has peak demands that average 119 kW per year, but spike as high as 167 kW during the summer. Their daily energy usage is substantial as well, ranging between 600 and nearly 1,000 kWh per day from winter to summer.
Under the old rates, they were paying some $56,873 or 21.73¢/kWh. The new rates will see their bill climb to $59,598, and increase of 4.79%, averaging 22.77¢/kWh.
But here’s the interesting thing about the new GS-2 rate: it is actually more beneficial to solar customers, since the increase is mostly in the per kWh charge. Indeed, when we model our potential client’s savings in Year 1 under the new rate as compared to the old, it increases by over $1,000—going from $14,808 to $15,818, a 6.8% savings increase for no additional out-of-pocket expense! Their payback now occurs in Year 6 instead of Year 7, their IRR increases from 12.2% to 12.9% and they will have saved an additional $12,000 in Year 10 than they would have under the old rates. (Combine the solar power system with intelligent storage and you are really on to something.)
SCE’s rates are going up for all classes of customers that we see: residential (12%+), small commercial (9%), and large commercial (4.8%). Solar can help all of these customer classes, and GS-2 customers can see an even greater savings from solar under the new rates than they could before. Oh, and SCE still has some rebate money for commercial projects, but that won’t last for long.
Stop suffering, start saving—make this the summer you go solar.
One of our astute readers contacted us to ask if we had noticed that SCE had just increased their rates—and dramatically. That got our attention so we decided to spend some quality time amidst SCE’s tariffs. The news is mixed: terrible news for people who are going to have to pay these crazy rates, but great news for everyone who can install solar. In fact, SCE’s new domestic rate is about all anyone would need to be convinced to finally make the switch to solar.
In case you did not know it, every SCE tariff—that is, the rate structures under which they bill their customers such as the Domestic tariff for most residential customers or GS-1 and GS-2 for most commercial customers—can be found on their website. If you know where to look. (Hint: look here!) Of course, when you do find what you are looking for, you are rewarded with something that looks like this:
This is one half of SCE’s Domestic rate (the delivery portion)—and this is about the simplest rate structure that they use! So it is not surprising that most normal people don’t really examine these things to see what is going on—they just groan and pay the bill.
But we suspect people will do more than groan when they look at their bills this summer.
We had been working on a solar proposal for a prospective client in SCE territory when we learned about the rate change. The client’s usage was relatively high, averaging 55 kWh/day over the course of the year; high, but still far lower than some of our clients. Under the rate structure in effect prior to June 1, this client’s annual bill worked out to $5,100 but after applying the new rates her annual total jumped to $5,750—an increase of a whopping 12.7%!
We will pause a moment to let that sink in.
What about that other potential client we wrote about, the one whose SCE bill already contained an incredibly misleading chart purporting to help her understand her bill. What impact will these new rates have for her? Under the rates in place before June 1, her total bill for the year was an already eye-popping $8,435—ouch! But under the new rates? Her new bill becomes $9,560—an increase of 13.4%!
So what is actually going on here? Turns out that the rates on the high end, Tiers 3 and 4, are the culprits, increasing by 16.4% and 14.8% respectively. Live in Tier 4 this summer and you will be paying 34.8¢/kWh for the privilege!
There is a silver lining here and that is that adding solar pays off better than ever. If your solar power system gets you out of Tier 4 alone, you will save thousands of dollars a year. For our prospective client who averaged 55 kWh per day, her savings come to $4,171 in Year 1. Even without a rebate from SCE (which for now at least has gone the way of the Dodo), her payback is in Year 5! After 10 years, thanks to these new rates, she will have saved an additional $25,000! And by avoiding a lease (this client is planning on using HERO financing), those benefits all go to her!
We have said it before and we will say it again: utility rates are only going up. While this example pertains to just SCE’s residential customers, guess what? You commercial customers are about to see your rates go up as well (more on that soon). And muni customers, now is not really the time to feel smug as your rates are going up too (and yes, PWP folks, we mean you!).
Give us a call and let’s see if we can’t help—contrary to the song, we’ve got a cure for these summertime blues!
We have looked at a lot of electric bills.
Pretty much every potential client that we speak to sends us a year’s worth of their electric bills as the first step in the process of getting a proposal for adding solar to their home or business. We use that data to model what your actual savings will be, based on the rate structure that the utility applies to you as their customer. Some of those rate structures are really complicated (like this time-of-use rate for EV charging), but for most residential clients, the rate should be relatively straight forward. After all, you are only paying for total usage (not demand charges) and most folks aren’t yet on a time-of-use rate. How complicated can it be?
But we had a bit of an epiphany the other day as we tried to explain an SCE bill to a couple at their kitchen table. Perhaps you’ve noticed this little chart if you are an SCE customer:
Presumably this is SCE’s attempt in helping you to understand your bill. So what is going on here? SCE residential customers are under a tiered rate structure. The lowest tier, the so-called baseline rate, is relatively cheap at roughly thirteen cents per kilowatt hour for the first few hundred kilowatt hours needed. Of course, no one uses just their baseline allocation and so the second tier is a tiny slice that is 30% of the baseline. If you stay in those first two tiers, congratulations, you are getting some pretty cheap energy.
Tier 3 is where things start to get pricey, with the cost per kilowatt hour doubling from what you paid for baseline. Tier 3’s allocation is 70% of baseline, which mean that if you use more than twice your baseline allocation, you are out of Tier 3 and into the dreaded Tier 4 where you will pay more than 31¢/kWh.
Ok, so far so good. But notice the odd thing that is going on in that graph. The widths of Tiers 1-3 are actually proportionate to reality. The width of the bar for Tier 1 is equal width to the sum of the bars for Tiers 2 & 3— which is exactly how the rate structure works. But what is going on with that bar for Tier 4? At a quick glance, you might think that you are using about the same amount of energy in Tier 4 as you did in Tier 1 (or Tiers 2 & 3). But look at the number: whereas Tier 1 was 399 kWh, the usage in Tier 4 is more than four times that amount at 1,799 kWhs! This client is living in Tier 4!
This is not only not helpful to “understanding your bill,” this is downright deceptive.
So what should this actually look like if drawn to scale? How about this:
Now the true impact of this client’s high energy usage starts to become clearer. Their usage is dominated by Tier 4 but you never would have seen that relying on the chart provided by SCE.
Of course for most clients, they are more interested in what they are paying, and it is here that the real impact of SCE’s tiered rate structure comes home. Check out this chart:
Wow - this client is spending 10x as much on Tier 4 as they are on Tier 1! That is some painful energy costs right there!
To be sure, if you review your bill carefully, you could find this same information, but the bill obscures the facts by parsing out the numbers in a manner that only makes sense to the lawyers who crafted the rate structure (and those of us who have made it our business to decipher them).
We have a suggestion to our friends at SCE—if you really want to help your customers understand their bills, start by ditching the misleading charts and replace them with a clear representation that makes the facts readily understandable.
In the meantime we will continue to do our part, one kitchen table at a time.
SCE has devised an extremely complicated rate structure designed for residential customers who drive electric vehicles. Instead of having a separate meter for EV charging, this rate structure is designed to replace the Domestic rate and apply to the entire household’s energy use—presumably at a savings. But does it? What we discovered may come as a shock…
SCE has long offered a rate structure that was designed for separate meter charging of EVs. But as more and more people acquire EVs there were relatively fewer consumers looking to go through the hassle of installing a separate meter just to charge their EV. SCE’s combined household and EV charging rate, known by the unmelodious monicker of TOU-D-TEV ("EV Rate,” for short), is designed to provide a lower-cost option for customers who were previously on SCE’s standard, Domestic rate structure.
As the acronym implies, the EV Rate is a time-of-use rate structure which means that what you pay for a kilowatt-hour of energy is directly tied to when you use it. There are three time classes: On-Peak (weekdays, excluding designated holidays, from 10 a.m. to 6 p.m.), Super Off-Peak (everyday, midnight to 6 a.m.) and Off-Peak (all other times). In addition to the time of use component, the EV Rate includes tiers. While Domestic rate customers are used to four tiers at which energy gets progressively more expensive, the EV Rate has only two tiers. Put this all together and you have the potential to pay wildly different amounts for your energy, as this table shows:
Stay within Level 1 and use your energy during Super Off-Peak and you pay just 9.4¢/kWh. But make the mistake of using energy during the middle of the day in the summer in Level 2 and you will be pay a shocking, 46.4¢/kWh! Yikes!!! Sure hope you aren’t at home during the day running your A/C.
EV owners are not required to take service under the EV Rate structure (at least not yet), so why switch? SCE advises customers that they can save money using this rate and we wanted to see if that was really true. We decided to model two different users and see how their bills would change between the Domestic rate and the EV Rate. The first user, our “average” user, consumes roughly 1,000 kWh per month (probably on the low end for most EV owners), or a little more than twice the baseline allocation. The second user, our “large” user, consumes more like 2,500 kWh per month and reflects a large home with heavy A/C use.
Let’s start with the average user:
This graph compares what our average user would have paid under SCE’s Domestic rate (the constant, orange line) against what she would pay under the EV Rate (the blue line) as a function of what percentage of the total monthly usage occurs during On-Peak hours. (Throughout we assume that 20% occurs during the Super Off-Peak hours of midnight to 6 a.m., and the balance occurs during Off-Peak).
Under the Domestic rate, our average customer would pay $3,200 for the year. If she manages to keep her On-Peak usage down below 30% of the total energy consumption, she will save money—as much as $355 or 11% off her bill, if her On-Peak usage is jut 5%.
But those “savings” can quickly disappear if she isn’t careful (or her children aren’t). Let her On-Peak usage climb to 60% of her bill and she will get hit with a 12% penalty and end up paying $388 more than if she had not switched.
What about our “large” user, how does he fare?
Most likely, better.
While his overall bill is much higher—he would be paying $8,500 on the Domestic rate—his potential savings versus penalty comparison is much more forgiving. He can save as much as 13% ($1,100) compared to a penalty of only 6% ($478). Plus, his breakeven point is higher, as he doesn’t start losing money until his On-Peak usage gets to 45%.
(This actually continues a trend with SCE’s residential rates where increases are highest at the lowest end of usage and the very highest users are actually getting a bit of a break. What an odd sort of mixed message.)
Bottom line—it is possible to save money, even significant money, if you are very careful about when you use energy.
Most EV’s are designed so that you can program them to charge during off-hours and anyone under this rate structure would absolutely want to insure that they use that feature. Indeed, there may be other energy users that could be similarly re-programmed such as pool pumps, dishwashers and washing machines, to run during the Super Off-Peak window. Unfortunately, it is very difficult to avoid running your A/C during the day if anyone is at home from 10 a.m. to 6 p.m. on weekdays—and doing so could be very expensive.
It should be obvious, but adding solar to the mix here could be huge since On-Peak hours directly coincide with the greatest production from a solar power system. Put most simply, if you own an EV and are considering making the switch to this EV rate structure, you need solar.
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